Thursday, November 11, 2010

Assault of Thoughts - 11/11/2010

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Felix Salmon discusses Mark Thoma's column which argues that Keynesian economics was dealt a major blow in the public's mind by the mid-term election. I suppose this is probably right - although public opinion can be a hard thing to figure out sometimes. I don't think the election was primarily about the stimulus. I think it was about a general aversion to incumbency, dissatisfaction with the economy, and desire to have balanced government. Americans like balanced government, and for very good reason. It would be nice to have a majority to ram through real fiscal stimulus in my mind, but aside from that instance of convenience, I think it's probably good we have balanced government too. I think the real nail in the coffin will be if the economy starts to improve in 2011 - that may give birth to a "the Republicans saved us" narrative. It would be a goofy narrative, but it might catch on. I don't think the community of economists have really been swayed by the mid-terms when it comes to Keynesian economics.

- The Space Politics blog notes that the Deficit Commission is taking aim at subsidies for commercial space flight. That's not encouraging. The Commission writes: "The National Aeronautics and Space Administration (NASA) plans to spend $6 billion over the next five years to spur the development of American commercial spaceflight. This subsidy to the private sector is costly, and while commercial spaceflight is a worthy goal, it is unclear why the federal government should be subsidizing the training of the potential crews of such flights. Eliminating this program would save $1.2 billion in 2015." And while we're talking about government subsidies for private innovation...

- ... Jonathan Catalan links to a piece by Don Boudreaux ridiculing Joe Biden's claim that the government has helped a lot of innovation in the U.S.. Biden certainly overstates his case (he refers to "every single great idea" of the last several centuries has "has required government vision and government incentive"), and then Don characteristically overstates what Biden stated in the first place (Don interprets this as "ascribing all great inventions and good ideas to government"). Regardless, Don's argument here essentially misses the mark when it comes to the economics of the question. Repeating the line of most critics of government subsidies to innovation, Don notes cases where we've had innovation without the government (he talks about the Great Northern Railroad). The problem is, it's a complete non-sequitor, just like people who raise the issue of private toll roads furnish complete non-sequitors. The argument is never that the private sector doesn't innovate. That's absurd. There's a reason why you don't see Biden saying "the private sector can't do anything" - he doesn't say it because he doesn't think that, and no intelligent person thinks that. Of course there were private railroads. So? Who said otherwise? Who denied the importance of the profit motive in providing essential goods and services? Not Biden and certainly not me. The argument is that because of externalities and entry barriers to certain essential investments, provision of these goods would be sub-optimal (not non-existent) without some assistance outside of market forces. I don't know why this is so hard for people to understand. I don't know why people keep bringing up private railroads and private toll roads as if we didn't know about those or as if they shed any light on the question at hand. Anyway - also worth noting - the Great Northern Railroad he mentions was finished 24 years after all the other government-sponsored transcontinental railroads (certainly benefiting from the growth in California that was spurred by the earlier, government sponsored railroads). I think humans will eventually colonize Mars. The question is, will it be in this century or will it be two or three centuries from now? I discuss the externalities associated with Mars colonization here. If you're going to rely on market forces alone, be prepared to accept sub-optimal investment and be prepared to wait.

26 comments:

  1. Government sponsored railroads were actually a rather sordid affair and touched off a number of panics due to the speculative booms they created. Indeed, Reconstruction largely collapsed as a result of Southern state sponsored railroad production.

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  2. "The argument is that because of externalities and entry barriers to certain essential investments, provision of these goods would be sub-optimal (not non-existent) without some assistance outside of market forces."

    That's the claim; but no one has really demonstrated it. From what I can tell, the government provides sub-optimal levels of road transport, which explains why we have traffic jams. You get a lot of classic government failure problems with the sort of exclusive public provision that we have in the U.S.

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  3. They were a sordid affair indeed. Hard to avoid with that much money sloshing around. There were some enlightened souls involved in the endeavor too, though.

    It doesn't change the fact that we would have had too few railroads, too late without the assistance.

    That's the claim; but no one has really demonstrated it.

    Well, nobody has "demonstrated it" in either direction - you have no more than I have. How would you "demonstrate" such a thing? You can't. Optimality isn't something we observe - and you and Don don't observe it any more than I do. But you can use logic and what we know about welfare maximization and the market, and there is an excellent case for the sub-optimality of market provision of certain goods.

    I have no doubt the government provides sub-optimal levels of infrastructure of all sorts. I never made the case that they do the job right. I'm simply making the case that if we want to approach optimality on these things, we need to have a sensible partnership and public and private collective action - i.e., a sensible combination of the government and the market.

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  4. Jesus... this is ridiculous. This is what Joe Biden said,

    "Every single great idea that has marked the 21st century, the 20th century, and the 19th century has required government vision and government incentive." (emphasis mine)

    I see that ridiculous interpretation is still the norm here.

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  5. Jonathan did you not read where I wrote that Biden overstated his case? Did I not quote precisely what you italicized above and say it was "certainly overstated" by Biden? Come on Jonathan - cool off. I know it's ridiculous. I said it was.

    All I'm saying is that Don went one step further than Biden even did and said that Biden "ascribed all great inventions and good ideas to government". What Biden said was ridiculous and overstated. What Don said Biden said was even more over the top.

    And my point is, once we all admit and get past Biden's obvious overstatement there are important points to make.

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  6. Sorry Daniel, you're still wrong. You wrote,

    "and then Don characteristically overstates what Biden stated in the first place (Don interprets this as "ascribing all great inventions and good ideas to government")."

    Don's interpretation, as you state it, is basically correct, because that is what Biden literally said.

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  7. Biden says some stupid shit; film at 11.

    That said, I think its hard to disagree that if the government really wants to get something done, and they have a relatively solid plan for doing it, they can get it done. Like the space race, public works projects, or the atom bomb.

    Of course the classic "seen and the unseen" problem rears its head, so it is impossible to really assess the costs of such a situation.

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  8. "Don's interpretation, as you state it, is basically correct, because that is what Biden literally said."

    If you think he literally said that it would be nice to see you quote him on it - because nothing you implied ascribed these innovations to government.

    nickn - "seen and unseen" applies to all actors, but yes - it certainly applies to the government.

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  9. Errr.... I did quote him on it. He's, um, quoted in that video.

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  10. I know he's quoted in that video, Jonathan. He is not quoted as saying what you are saying though. If you think he said what you are saying, quote him on it.

    I've noted the error in what he did say - I noted it before you even started commenting on this post. I don't need to overstate his point to note where it goes wrong.

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  11. Quite frankly we could have done without the atom bomb and most public works projects for that matter. Sure, the Romans built great roads and aquaducts, but that was the basis for their ability to commit massive acts of genocide, enslave millions, use enslaved miners until they died of overwork or were killed in other ways, etc.

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  12. I could have done without the atom bomb in 1945 probably. I would be much less interested in going a-bombless in the 1950s and 1960s.

    And the fact is, even in the early 1940s when we started the program we had no idea it would be relatively easy, in 2010, to say "well there's no need to drop it on Japan". In the early 1940s, for all we knew 1945 would be marked with discussions auf Deutsch whether or not to drop it on London.

    So I guess I'm just saying your idealism is endearing but I'm not sure it really pans out.

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  13. The key question, I suppose, is whether our interstate system is the basis for massive acts of genocide, enslavement, etc.

    ...and I'm assuming that's why you stuck with talking about the Romans rather than bringing it full circle to the U.S.

    I'm with you on the atom bomb, though.

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  14. If Hiroshima and Nagasaki taught us anything it should have been that mutually assured destruction, for all it's implicit insanity, is still far more sane than having one global power that wants a quick resolution to its problems have a bomb.

    It's precisely because of the horror of 1945 that I'm glad we had a bomb in 1965. Thank God the Russians got one quick - if we had been the only power with a bomb for much longer after 1945, who knows what kind of hellscape of our own making we'd be living in now. Mutually assured destruction is no way for a civilized people to live - but it's better than many of the alternatives.

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  15. That seems like an odd justification for having the bomb in the Cold War: "Good thing we did that insane thing so that we could do that less insane thing so that further insane things would be less likely than if we were to keep on doing that original insane thing we did (although not less likely than if no one had ever done that insane thing in the first place)"

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  16. Evan - you aren't reading me right. I'm saying:

    1. "Glad we started making that thing because the Germans and the Russians were too and they already bombed the hell out of London and would have had no problems with a-bombing it."

    2. "That was fucking unnecessary, Truman"

    3. "Good thing we have a bomb to have a fighting chance at preventing the Soviets from dropping theirs because Truman already showed us what is likely to happen if the Soviets had a bomb and we didn't".


    Feel free, Evan, to point out where I said it was a good thing that we dropped the bomb. Bring it. Come on, where did I say it?

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  17. I'm holding up Truman as an example of why it's good that we have a bomb when everyone else does. How did you twist that into me approving of his choice? You turned my argument around 180 degrees. I was using Truman as a cautionary tale about why deliberate military Ludditism is dangerous.

    Would I like to live in a world where people magically didn't know how to kill each other with advanced technology? Sure. Sounds great. As soon as we live in such a world you can let me know. As long as we don't, I'm of the view that keeping up to date with military technology and hoping that no single power has a break-through is about the best we can hope for.

    That doesn't mean we need ten thousand nukes. I could embrace a disarmament that cuts down on that substantially. But I'm not going to apologize or reject the idea of having a good number of them and regularly improving on them.

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  18. "I know he's quoted in that video, Jonathan. He is not quoted as saying what you are saying though. If you think he said what you are saying, quote him on it."

    ... are you being serious?

    Joe Biden, "Every single great idea that has marked the 21st century, the 20th century, and the 19th century has required government vision and government incentive."

    Daniel Kuehn's restatement of Boudreaux, "...all great inventions and good ideas to government"

    What is fundamentally different between "every single great idea" and "all great inventions and good ideas..."? You are obviously exaggerating Boudreaux's deviation from Biden's original statement, because for all intents and purposes (within the context of economic progress) that is basically what Biden said.

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  19. Jonathan, I take it that the difference Daniel is pointing out is between "required government vision/incentive" and "ascribing [...] to government".

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  20. Feel free, Evan, to point out where I said it was a good thing that we dropped the bomb. Bring it. Come on, where did I say it?

    You didn't say it. In my defense, I did clarify that the good of it was in light of its later application to the Cold War. On the other hand, I'm not sure you really said your #2 either, so it's not exactly fair to hold anyone to reading your mind on whether you thought Truman's decision was unnecessary. "I could have done without 1945" isn't nearly as strong as your restatement here.

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  21. The difference is not in "every single great idea" and "all great inventions" Jonathan. Don accurately restated the scope of Biden's statement, and I agreed with Don and said Biden had overstated that.

    What Don overstated was saying that Biden "ascribed" it to government, when Biden actually just said that government provided "vision" and "incentive".

    I got some tax credits from the government for my tuition payments for my master's degree. Government provided me an "incentive" to educate myself. It would be accurate for me to say "government provided me an incentive to pursue higher education", and it would also be accurate for me to say "government has provided millions of Americans with an incentive to pursue higher education". It would not be accurate for you or Don to turn around and say "Daniel ascribed his pursuit of higher education to government". Of course I didn't. I chose to, I put in a lot of work, I paid for most of it (some through my employers compensation package which included educational benefits, some out of pocket). I am not ascribing my pursuit of higher education to government. I'm saying they provided an incentive, which we can expect increased the population's education on the margin.

    Those are two very different things, Jonathan.

    When you frame the argument as "progress is ascribed to government" it's very easy to just point to a private road or a private railroad and say "can't ascribe that to government".

    But Don's argument doesn't work if you look at what Biden actually said - the government provides incentive to a lot of progress. I'm adding on that and saying that that incentive is essential for optimality in a lot of these product markets.

    But neither Biden or I are "ascribing" this progress to government.

    Don does this on a regular basis - he overstates peoples' cases so that they're easier for him to knock down.

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  22. Evan - I agreed with Xenophon that I could have done without 1945 (isn't "I could have done without X" and "X was unnecessary" about the same thing). I also refered to the events of 1945 as a "horror" and "insane". Does that not give it enough oomph for you? How else would you have me phrase it? What did I leave ambiguous?

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  23. This comment has been removed by a blog administrator.

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  24. And, Oh! BTW, I don't think there is any need to over analyze what Biden actually meant. He effectively said, that without visionaries in government, we'll still be living in the 16th century.

    Don was being too nice to Biden. Biden was not just overstating the case, he was told a fib. That's MY last word. Of course you are free to split this into more strands.

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  25. sandre you give me nothing to split. When you completely fabricate claims like that I need say nothing more than "you show me where he said that and I'll concede".

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  26. I can't think of a public works project that the U.S. has undertaken which didn't come with massive levels of human misery. The T.V.A. is a very good example; so is the Blue Ridge Parkway; so are any number of western U.S. dam projects.

    I used the Romans to demonstrate the long standing nature of such things.

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